Stuart Company has a choice of two investment alternatives. The present value of cash inflows and...
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Stuart Company has a choice of two investment alternatives. The present value of cash inflows and outflows for the first alternative is $200,000 and $162,000, respectively. The present value of cash inflows and outflows for the second alternative is $375,000 and $300,000, respectively. Required a. Calculate the net present value of each investment opportunity. (Negative amounts should be Indicated by a minus sign.) b. Calculate the present value index for each investment opportunity. (Round "PVI" to 2 decimal places.) c. Indicate which investment will produce the higher rate of return. a Alternative 1 (NPV) Alternative 2 (NPV) b. Alternative 1 (PVI) Alternative 2 (PVI) c. The investment that will produce the higher rate of return is Stuart Company has a choice of two investment alternatives. The present value of cash inflows and outflows for the first alternative is $200,000 and $162,000, respectively. The present value of cash inflows and outflows for the second alternative is $375,000 and $300,000, respectively. Required a. Calculate the net present value of each investment opportunity. (Negative amounts should be Indicated by a minus sign.) b. Calculate the present value index for each investment opportunity. (Round "PVI" to 2 decimal places.) c. Indicate which investment will produce the higher rate of return. a Alternative 1 (NPV) Alternative 2 (NPV) b. Alternative 1 (PVI) Alternative 2 (PVI) c. The investment that will produce the higher rate of return is
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Answer rating: 100% (QA)
SOLUTION a To calculate the net present value NPV of each investment opportunity we first need to calculate the present value PV of the cash inflows a... View the full answer
Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-1259569197
8th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Olds
Posted Date:
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